Resolution Life Australasia Ltd v N. M. Superannuation Pty Ltd

[2023] NSWSC 98

Supreme Court

New South Wales

Medium Neutral Citation:

Resolution Life Australasia Ltd v N. M. Superannuation Pty Ltd [2023] NSWSC 98

Hearing dates:

30 January – 1 February 2023; further written submissions received 6 and 7 February 2023

Date of orders:

16 February 2023

Decision date:

16 February 2023

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

On its proper construction, Contract 20555 does not prevent the defendant from engaging in the Request for Proposal tender process

Catchwords:

INSURANCE – life insurance – proper construction of contracts of insurance – whether the contracts contained implied term that defendant not hinder or prevent fulfilment of purposes of express promises made in the contract – whether the contract contained promise by defendant trustee to pay plaintiff insurer premiums – whether on their proper construction the contracts prevented defendant insurer from engaging in request for proposal process whereby it invited tenders for the insurance presently provided by the plaintiff insurer

Legislation Cited:

Insurance Contracts Act 1984 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth)

Cases Cited:

Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201

Butt v M’Donald (1896) 7 QLJ 68

Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24

Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32

Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64

Manks v Whiteley [1912] 1 Ch 735

McVeigh v National Australia Bank Ltd (2000) 278 ALR 429; [2000] FCA 187

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Nunn v Wily (2001) 10 BPR 18,983; [2001] NSWSC 317

Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 597; [1979] HCA 51

Whiteley v Delaney [1914] AC 132

Texts Cited:

P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters)

W I B Enright and R M Merkin, Sutton on Insurance Law (4th ed, 2015, Thomson Reuters)

Category:

Principal judgment

Parties:

Resolution Life Australasia Limited (Plaintiff)
N. M. Superannuation Proprietary Limited (Defendant)

Representation:

Counsel:
G K J Rich SC with J Burnett (Plaintiff)
T M Faulkner SC with D Klineberg (Defendant)

Solicitors:
Gilbert + Tobin (Plaintiff)
King & Wood Mallesons (Defendant)

File Number(s):

2022/280159

Judgment

1. The plaintiff, Resolution Life Australasia Limited (“the Insurer”), is a life insurance company.

2. The Insurer provides, amongst other products, “life risk insurance”. This includes “individual” or “retail” risk insurance of particular persons. It also includes “group” or “wholesale” risk insurance of, relevantly, members of corporate superannuation plans. The Insurer was formerly a member of the AMP group of companies. It was then known as AMP Life Limited. It is now a member of the Resolution Life group of companies.

3. The defendant, N. M. Superannuation Proprietary Limited (“the Trustee”), is the current trustee of the AMP Super Fund (“the Fund”). The Trustee has been a member of the AMP group of companies at all relevant times.

4. Between January 1991 and May 2004, the Insurer and the Trustee’s predecessor trustee of the Fund, AMP Superannuation Limited (“the Former Trustee”) entered into four contracts, each described as life policies and containing a variety of “Insured Benefits” in the nature of life insurance (“the Contracts”).

5. Between October 2018 and November 2021, AMP Limited sold its “wealth protection and mature businesses” to subsidiaries of the Insurer’s ultimate parent company, Resolution Life Group Holdings Limited, for a very significant sum (“the Sale”). The Sale completed on 30 June 2020.

6. The terms of the Sale were recorded in a Share Sale and Purchase Agreement (“the Sale Agreement”) made between members of the AMP group and the Resolution Life group. The Sale Agreement was originally made on 25 October 2018, then twice amended and restated. Its final and prevailing iteration was dated 23 June 2020, seven days prior to completion of the Sale.

7. Although AMP was selling its life insurance business, it was not selling certain investment operations that the Insurer had hitherto performed under life investment policies issued to the Former Trustee. It was therefore necessary to restructure the Contracts so that the investment elements were separated and retained within the AMP group. It was also necessary to make other changes to the Contracts to reflect the fact that the Insurer and the trustee of the Fund, to be the Trustee, would no longer be related entities within the same corporate group.

8. It was a condition precedent to completion of the Sale that the Contracts be restructured to reflect these matters.

9. Satisfaction of the condition precedent was achieved by two sequential rounds of documentation. The “agreed principles” for the restructure of the Contracts were recorded in a “Separation Deed” dated 15 May 2020 between the Insurer, the Trustee, the Former Trustee and AMP Limited. “Greater detail” was set out in amendment deeds to the four Contracts.

10. As part of the Sale transaction, there was on or about 15 May 2020 a successor fund transfer of members and assets of the Fund from the Former Trustee to the Trustee, such that the Trustee now has all the powers and liabilities under the Contracts.

11. As part of the consideration for the Sale a member of the AMP group acquired a minority equity interest in the Insurer’s then parent, a member of the Resolution Life group. AMP later sold that interest to another member of the Resolution Life group so that, by 28 June 2022, the AMP group ceased to hold any interest in the Resolution Life group.

12. Shortly thereafter, in September 2022, the Trustee commenced a tender process, known as the “Request for Proposal” (“the RFP”), whereby it sought expressions of interest from insurers to provide life cover to those individuals and groups of individuals currently insured by the Insurer under the Contracts.

13. For a short time, the Insurer participated in the RFP process. It has ceased to do so for reasons evidently associated with issues it says arise in relation to its reinsurance arrangements. I will return to this.

14. The Insurer contends that the Trustee is thereby acting in breach of an implied term of the Contracts and seeks a declaration to that effect.

15. It also seeks injunctions restraining the Trustee from:

1. terminating the Contracts;

2. “deliberately procuring” that an insurer chosen as the successful candidate in the RFP replaces it as the provider of insurance benefits to persons currently insured under the Contracts; and

3. “deliberately procuring” that premiums cease to be paid to the Insurer in respect of “some or all” of members of the Fund whose life is insured under the Contracts and that future premiums be paid to the successful candidate in the RFP.

16. The Trustee has stated, both before and during the hearing, that it is not proposing to terminate the Contracts.

The Contracts

17. There are four Contracts. They were known as Contract 20555, Contract 20555A, Contract 20666 and Contract 70002C. They were originally made between the Insurer (to repeat, then a member of the AMP group and known as AMP Life Limited) and the Former Trustee on dates between January 1991 and May 2004. Contract 20555 comprises both individual and group risk insurance. The other three Contracts provide only group risk insurance.

18. The four Contracts were amended and restated on 30 June 2020; the day the Sale completed. They have been amended since, but not materially to the issues here. Thus, although in its List Statement the Insurer refers to the December 2022 iteration of the Contracts, it accepts that these are not materially different from their 30 June 2020 iterations.

19. The Contracts have substantial value. At 30 June 2022, the annual premium income earned by the Insurer from the Contracts was several hundreds of millions of dollars and provided cover for some 135,000 Fund members.

20. In their submissions, the parties focused on the most valuable Contract, Contract 20555. I will do the same. I understand that my conclusion in relation to Contract 20555 will apply to each of the other Contracts. I will invite submissions from the parties as to whether they contend that any different result should be found in relation to Contracts 20555A, 20666 and 70002C.

The Request for Proposal (“RFP”)

21. On 18 August 2022, an email was sent from “AMP Master Trust Tender”, on behalf of the Trustee, to various insurers, including the Insurer. It stated:

“AMP is now undertaking a formal tender for our ‘default’ insurance arrangements, currently insured by [the Insurer], covering around 274,000 members with annual premiums in force in excess of [a specified amount].

We are very pleased to invite you to participate in the tender.”

22. The RFP invited insurers to tender for “most of the life insurance provided to Members of the [Fund]”.

23. The RFP stated:

“As Primary Insurer, the successful candidate will become the insurer for members who are currently insured under Master Trust insurance policies issued by [the Insurer] to [the Trustee]”;

“For existing members who hold insurance under particular policies, [the Trustee] will offer existing members and employers a transfer to the new insurance arrangements”;

“It is intended that the insurance offer adopted through this RFP will deliver the following simplification benefits: (1) Consolidation of the existing corporate insurance contracts into as few as possible, ideally a single insurance contract for Group insurance …”;

“AMP intends to appoint the go forward Primary Insurer in the first half of 2023 and ‘go live’ to members in late 2023”; and

“[the] go forward Primary Insurer will be required to support … a new modernised insurance offer [and] the transition of existing members to the new insurance offer.”

24. On 5 September 2022 the Trustee sent an email to the insurers participating in the RFP process, stating:

“[T]he scope of the opportunity includes the membership groupings set out in Table A below. However, as stated in the RFP ‘for existing members who hold insurance under particular policies, [the Trustee] will offer existing members and employers a transfer to the new insurance arrangements’.”

“Table B below lists the insurance policies where [the Trustee] cannot simply terminate the policies. What this process looks like is still to be determined, however [the Trustee] intends it to be offer [sic] a simple and easy way for the member to transfer to the new insurer’s offer.”

“The Table B Insurance Contracts are 7002C [sic], 20555, 20666 – Group Life Cover, and 20555A – Income Protection Cover. Any insurance offered to members by [the Trustee] must meet [the Trustee’s] obligation to act in the best financial interests of members. Bidders should therefore consider how to structure their proposal to demonstrate the best financial interests of members.”

25. As I have said, for a short time the Insurer participated in the RFP process but withdrew shortly thereafter.

26. As I have also said, this was evidently because of the reaction to the RFP process of the Insurer’s reinsurer, Munich Reinsurance Company of Australasia Limited (“Munich Re”). On 27 and 29 August 2022 Munich Re wrote to the Trustee and the Insurer, respectively. Munich Re asserted that the Insurer’s obligations under its treaty prevented it from participating in the RFP, and that if action taken by the Trustee led to the Insurer breaching its duty with Munich Re, Munich Re would hold the Trustee responsible for the extremely large loss it contended it would suffer.

27. In view of the conclusion to which I have come, it is not necessary for me to further consider Munich Re’s position.

28. The RFP process is ongoing and has proceeded, and is proceeding, to the following timetable:

Event	Date
Request for Proposal issued	18 August 2022
Additional data issued	31 August 2022
Initial meeting between AMP and each insurer	29 – 31 August 2022
Presentation from each insurer at AMP offices	17 – 28 October 2022
Non-pricing responses submitted	23 November 2022
Pricing responses submitted	10 February 2023
Full day site visits with short-listed insurers	27 – 30 March 2023
Decision	Early May 2023

The Insurer’s case

29. It is common ground that Contract 20555 contains the following express terms (“the Express Terms”): ^[1]

    1. Save that the Trustee contends that, in relation to the term at (c)(ii), for the Contract to come to an end, the "Secure Growth Investments Policy" must also be terminated. I understand there is no dispute about this. Nothing turns on it.

(a)   the contract sets out the benefits that the Insurer agrees to pay to the Trustee in respect of the Members (cl 1.1);

(b)   “Member” means a member of the AMP Super Fund whose life is insured under the Protection Policy or an Individual Policy (cl 11);

(c)   the contract ends when:

(i)   the Insurer and the Trustee agree to end the Contract; or

(ii)   there are no Members (cl 1.3);

(d)   the Trustee must advise the Insurer of the names of persons who wish to become Members and any other information about those Members that the Insurer requires (cl 3.1);

(e)   the Insurer will establish and maintain a Member Plan in respect of each Member to determine their benefits (cl 3.2);

(f)   the Plan in respect of a Member will end when:

(i)   the Member dies; or

(ii)   the parties agree to end the Plan (cl 3.2);

(g)   the Insurance Benefits available in respect of Members are as agreed by the Insurer and the Trustee from time to time (cll 3.5 and 11);

(h)   in respect of each Member, each Insurance Benefit payable under the Protection Policy or an Individual Policy starts at the Plan Starting Date and ceases on identified dates (cl 3.7);   

(i)   the premiums and applicable government stamp duty and other charges in respect of the Protection Policy or an Individual Policy are calculated and payable as advised to the Trustee by the Insurer (cl 3.9). ^[2]

2. List Statement at C7.

30. The Insurer contends that there is an implied term of Contract 20555 (“the Implied Term”) that:

“… [the Trustee] must do what is necessary on its part to enable [the Insurer] to have the benefit of the contract and must not hinder or prevent the fulfilment of the purposes of the express promises made in the contract.” ^[3]

3. List Statement at C8B.

31. The existence of the Implied Term in contracts other than insurance contracts is well established. ^[4]

    4. Butt v M’Donald (1896) 7 QLJ 68 at 70-71 (Griffith CJ); Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 597 at 607; [1979] HCA 51 (Mason J, with whom Gibbs, Stephen and Aickin JJ agreed; Barwick CJ determining the appeal on a narrower basis without disagreeing); Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45 at [36] (Gleeson CJ, Gummow, Kirby and Hayne JJ); and see Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 at [106]-[109] (Whelan JA and Riordan AJA).

32. The Trustee disputes that such a term should be implied into a contract of insurance, such as Contract 20555, because an implied obligation to act in the utmost good faith already exists,^[5] and that, accordingly, it was not necessary to imply the posited term. ^[6]

    5. Insurance Contracts Act 1984 (Cth), s 13.

    6. See Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [29] (French CJ, Bell and Keane JJ).

33. However, as the Insurer pointed out:

1. a contractual term implied by law is generally implied in all contracts, or all contracts of a particular class; ^[7]

2. the authorities to which I referred at [31] provide that the Implied Term is implied in “every” contract unless inconsistent with the contractual language; ^[8]

3. those authorities have already established that this Implied Term is “necessary” in the relevant sense;

4. the content of the Implied Term is not coextensive with the content of the duty of utmost good faith; and

5. there is no reason the Implied Term is displaced or rendered “unnecessary” by the duty of utmost good faith implied by s 13 of the Insurance Contracts Act1984 (Cth). ^[9]

   7. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448; [1995] HCA 24 (McHugh and Gummow JJ); Commonwealth Bank of Australia v Barker (supra) at [21] (French CJ, Bell and Keane JJ), [56] (Kiefel J), and [113] (Gageler J).

   8. Butt v M’Donald (supra) at 70-71; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (supra) at 607-608 (Mason J, with whom Barwick CJ, Gibbs, Stephen and Aickin JJ agreed); Peter’s (WA) v Petersville Ltd (supra) at [35] (Gleeson CJ, Gummow, Kirby and Hayne JJ).

   9. As the Insurer submitted “there is no reason at all why contracting parties cannot wear both a belt and braces”.

34. I am satisfied that Contract 20555 contained the Implied Term.

35. The Insurer does not contend that the Trustee has acted or is threatening to act in breach of the positive obligation posited by the Implied Term: to “do what is necessary” to enable the Insurer to have the benefit of the contract.

36. Rather, the Insurer’s contention is that by engaging in the RFP, the Trustee is proposing to breach the negative covenant in the Implied Term not to “hinder or prevent the fulfilment of the purposes of the express promises made in the contract”.

37. Thus, the Insurer contends:

“Here, [the Trustee] intends to breach that negative covenant by taking deliberate steps to deprive [the Insurer] of the principal benefit for which it has contracted, namely, premium revenue in respect of Members who are insured under the Contracts.

It is this threatened breach which forms the basis for the declaratory and injunctive relief sought by [the Insurer] in these proceedings.” ^[10]

10. Paragraphs 79 and 80 of the opening submissions and pars 93 and 94 of closing submissions.

38. As is evident from that submission, the Insurer’s position is that there is an “express promise” in Contract 20555 of the kind posited in the Implied Term: that it be paid the “premium revenue in respect of Members who are insured under the Contracts” by the Trustee.

39. The Insurer’s case depends on this proposition. I return to it below.

40. Finally, the Insurer’s case is that:

“On the proper construction of Contract 20555 and each Individual Policy, including the express and implied terms pleaded [as set out above], [the Trustee] may not:

(a)   terminate the contract unilaterally in order that an insurer who is chosen as the successful candidate in the RFP … may replace [the Insurer] as the provider of insurance benefits to some or all Members currently insured under Contract 20555 (including any Individual Policy);

(b)   while the contract subsists and without [the Insurer’s] consent, deliberately procure that an insurer who is chosen as the successful candidate in the RFP replaces [the Insurer] as the provider of insurance benefits to some or all Members currently insured under Contract 20555 (including any Individual Policy); or

(c)   while the contract subsists and without [the Insurer’s] consent, deliberately procure that premiums cease being paid to [the Insurer] in respect of some or all Members currently insured under Contract 20555 (including any Individual Policy) and that future premiums are paid instead to an insurer who is chosen as the successful candidate in the RFP.” ^[11]

11. List Statement at C9.

41. In its Summons, the Insurer seeks a declaration that, on the proper construction of the Contracts, the Trustee may not act as set out at [40 (a)–(c)] above and an order restraining the Trustee from doing so.

42. Although the chapeau to the clause set out at [40] asserts that the posited construction arises from the “express and implied terms” of Contract 20555, as developed in argument, the Insurer’s case was that the relevant construction arises only from the Implied Term.

41. Thus, I had this exchange with Mr Rich SC, who appeared with Mr Burnett for the Insurer:

“[HIS HONOUR]:   You’ll need an implied term to get there, won’t you?

[MR RICH]:            We will, but that’s where we are.

[HIS HONOUR]:    That’s the heart of it.

[MR RICH]:            Yes. But what your Honour knows is that unless both parties agree to end this contract, it will continue in force until there are no more members. …”

44. Mr Rich did not seek to develop any argument to show that any of the express terms, as set out at [29] above, could give rise to the posited construction. I do not see how they could.

The vital question

45. Much was said during oral and written submissions about:

1. the commercial implications, particularly for the Insurer, of the Trustee’s engagement in the RFP;

2. the lack of precedent for such an exercise;

3. whether an ability of the Trustee to conduct the RFP would “seriously undermine and devalue the rights conferred” on the Insurer;

4. the unlikelihood of, as put on behalf of the Insurer, the parties intending to permit the Trustee to engage in an RFP, and, as put by the Trustee, of the parties intending that the Trustee could not seek to promote the Fund’s Members’ interests by doing so;

5. whether the potential for the Trustee to “unilaterally replace” the Insurer “of all (or many thousands) of the Members currently insured under the Contracts” could render the contracts “nugatory or largely worthless”; and

6. whether the posited construction would cause the Trustee to act in breach of its obligations to members of the Fund, including its obligations under the Superannuation Industry (Supervision) Act 1993 (Cth). ^[12]

   12. Which, amongst other things, implies into the rules of all superannuation funds a covenant not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee’s functions and powers: s 52(2)(h).

46. The question for me, however, is whether the particular case put forward by the Insurer is made out. As I have explained, that case contends for the Implied Term and for a particular construction of the Contracts said to arise from the Implied Term; and not otherwise.

47. As I have explained, as developed in submissions, the Insurer’s case comes down to the proposition that the operation of the Implied Term is enlivened by an “express promise” in the Contracts that the Trustee will pay or cause to be paid premiums under the relevant policy to the Insurer.

48. Thus in closing submissions, Mr Rich said:

“The express promises which are made in the Contracts include, and your Honour and I have had this discussion, but on our case include the obligation to pay premiums on the due date.”

Does Contract 20555 contain an express, or any, promise by the Trustee to pay premiums?

49. The recitals to Contract 20555 provided:

“A   On 1 September 1996, [the Insurer] and [the Former Trustee] …, as policy owner, agreed to a contract which set out a number of policies of life insurance (Contract). The Contract was amended by [the Insurer] and [the Former Trustee] from time to time including removing and adding policies of life insurance to the Contract.

B   On 15 May 2020, there was a successor fund transfer of members and assets supporting their benefits (including the Contract) by [the Former Trustee] to the Trustee as trustee of the [Fund] … .

C   On 15 May 2020, [the Former Trustee] and the parties entered into a deed for the redemption and termination of certain investment-linked life policies and the assignment of certain other investment-linked life policies and risk life policies including the policies set out in the Contract (Separation Deed).

D   Under clause 4.5(a) of the Separation Deed, the parties agreed to prepare a document that accurately reflected the terms of the Contract immediately before [15 May 2020], and was then revised to reflect certain amendments contemplated by the Separation Deed.

E   Under clause 4.5(b) of the Separation Deed, the parties agreed to adopt the document described in recital D as the authoritative agreed terms of the Contract as prepared and amended in accordance with clause 4.5(a) of the Separation Deed.” (Emphasis in original.)

50. It is common ground that recitals D and E accurately reflect the provisions in cll 4.5(a) and (b) of the Separation Deed.

51. Clause 4.3 of the Separation Deed provided:

“[The Trustee] and [the Insurer] agree that with effect from [15 May 2020] the [Contracts] ^[13] that contain the [relevant policies] are amended as set out in … paragraph numbered 5 (Risk cover) of Schedule 5.”

13. Among other contracts.

52. Paragraph 5 of Sch 5, referred to in cl 4.3, provided:

“Wherever [a relevant policy] provides risk cover, provisions to the following effect are inserted into [those policies] … :

a.   premiums for risk cover will be payable by [the Trustee] (with the remedy for non-payment being limited to the lapsing of cover under paragraph b below);

b.   risk cover relating to a member will lapse if the premium for cover remains unpaid for the applicable period … after becoming due and payable …”

53. Clauses 3.8 and 3.9 were inserted in Contract 20555 to give effect to the amendments foreshadowed in the Separation Deed and, in particular, the amendment to reflect par 5 of Sch 5:

“3.8   Lapse

If a premium due in respect of a Member is not paid within one month of its due date the Insurance Benefits in respect of that Member will lapse.

3.9   Insurance Premium

The premiums and applicable government stamp duty and other charges in respect of this Policy, are calculated and payable as advised to the Trustee by [the Insurer] from time to time and at the frequency advised to the Trustee by [the Insurer].

The premiums in respect of a Member’s Cover is to be paid monthly in advance.”

54. The Insurer’s case, based as it is on the negative covenant in the Implied Term, assumes the existence of an “express promise” on the part of the Trustee to pay Members’ premiums to the Insurer on their due date.

55. But there is no such express promise, as Mr Rich accepted in this exchange:

“[HIS HONOUR]:   There’s no express term that gets you there because even if I read cl 5 of Sch 5 [of the Separation Deed] into [cll] 3.8 and 3.9 [of Contract 20555], that doesn’t give you a right to sue, does it?

[MR RICH]:            No.”

56. Nor can I see any such promise implicit in the words of cll 3.8 or 3.9.

57. As was put on behalf of the Trustee:

“i.   clause 3.9 provides that [the Insurer] may determine the premium and advise the Trustee but does not require the Trustee to pay it;

ii.   clause 3.9 provides that the premium in respect of a Member’s Cover ‘is to be paid monthly in advance’, but this is agreement on the timing of payment rather than a positive obligation on the Trustee to pay even if, for example, the Member no longer wants life insurance from [the Insurer];

iii.   on the contrary, clause 3.8 expressly contemplates the possibility that the Trustee will not pay a premium, in which case Insurance Benefits from [the Insurer] will lapse;

iv.   the language of clauses 3.8 and 3.9 (‘due’, ‘payable’, ‘is to be paid’) is not to be construed as an absolute legal obligation irrespective of a Member’s desire to cancel the insurance;

v.   clause 5 of Schedule 5 of the Separation Deed … takes [the Insurer’s] argument no further, the ‘premiums’ referred to are only such premiums which are due under Contract 20555 (the real purpose of clause 5(a) is to make it clear that after [the Insurer] leaves the AMP Group, [the Insurer] will look to the Trustee for payment of premiums rather than members, just as the Trustee will henceforth make the claims (5(c)), receive the benefits (5(d)), receive notifications from [the Insurer] (5(f)), etc);

vi.   apart from lapsation [sic] the Contract includes no sanction for non-payment of premium, either for the Trustee or for the Member;

vii.   in this last respect, Contract 20555 has faithfully captured the parties’ agreed principle in Items 5(a) and 5(b) of Schedule 5 of the Separation Deed, namely that there be no sanction for non-payment of premium (other than lapse of the relevant Insurance Benefits).”

58. I agree.

59. In my opinion, there is no promise, express or implied, in Contract 20555 by the Trustee to pay premiums.

60. That is consistent with the nature of life insurance.

61. A life insured is always entitled to terminate cover, whether under the terms of the policy or at common law. ^[14]

    14. W I B Enright and R M Merkin, Sutton on Insurance Law (4th ed, 2015, Thomas Reuters) at [12.270].

62. Indeed, the Insurer led evidence to this effect.

63. Thus, Ms Megan Beer, the Chief Executive Officer of the Insurer, deposed:

“Generally, life risk insurance products are issued on a guaranteed renewable basis and are expected to be long-term in nature, to protect customers against changing health conditions, in circumstances where a customer may not be able to obtain replacement insurance with equivalent benefits or may only be able to do so at significantly increased cost. All in-force life insurance contracts must be administered in accordance with the original contract terms and may continue for extended periods of time, until its natural expiry or the customer decides to cancel. In this respect, life insurance products are different to general insurance products, which generally provide cover for a set, relatively short period and the contract of insurance is renewed on new terms and conditions at the conclusion of each period (such as each year).” (Emphasis added.)

64. The only reference to cancellation in Contract 20555 is in cl 3.7 which provided, relevantly:

“In respect of each Member, each Insurance Benefit starts at the Plan Starting Date and ceases on the earlier of:

…

(g) the cancellation of the Insurance Benefit;

(h) the lapse of the Insurance Benefit (see clause 3.8);

…”

65. Whether or not that clause should be construed as conferring on a Member a right to cancel the policy, a life insured can always decide to cease paying the premium of a life policy, for example as they age and premiums increase, and bring about the same result as far as he or she is concerned.

66. As cl 3.8 of the Contract makes clear, if a premium is not paid timeously, then the cover will lapse. But the Insurer has no entitlement to sue the Trustee for the premium. That is because the Trustee has not promised to pay the premiums. Neither cll 3.8 nor 3.9 contain a promise to pay.

67. And if those clauses are read in light of par 5 in Sch 5 of the Separation Deed, ^[15] this position is even clearer. That clause states, in terms, that although premiums “will be payable” by the Trustee, the remedy for non-payment is confined to lapsing of cover. In that context, the words “will be payable” were obviously intended by the parties to be merely facultative, in the sense described in the Trustee’s submission that I have set out at [57(v)] above.

    15. Which the Insurer accepted was appropriate, in light of the principles to which I refer at [75] and [79] below.

68. As there is no promise to pay the premium, there is no obligation or promise, let alone an express obligation or promise, the purpose of which the Trustee could be said to be preventing the fulfilment. The Implied Term is thus not enlivened.

69. It must follow that the construction of the Contract for which the Insurer contends is not made out.

70. For that reason alone, the Insurer’s case must fail.

The wider context

71. There is a wider context confirmatory of that conclusion.

72. As I have set out above, Contract 20555 referred to the Separation Deed in its recitals.

73. The Separation Deed in turn, in its recitals, made reference to the Sale Agreement thus:

“A   On 25 October 2018, two AMP Group companies entered into [the Sale Agreement] with [the Insurer] regarding the divestment of AMP Group’s ‘Wealth Protection and Mature’ business …

B   As part of the [Sale Agreement], there is a condition precedent to completion which concerns a restructure of AMP Group’s superannuation business, including successor fund transfers, the redemption and termination of certain investment-linked life policies and the assignment of certain other investment-linked life policies and risk life policies.”

74. Documents referred to in the text of a contract form part of the context by reference to which objective determination of the rights and liabilities of the parties may be considered. ^[16]

    16. Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46] (French CJ, Nettle and Gordon JJ).

75. Here, to repeat, the relevant iteration of Contract 20555 was made on 30 June 2020. It referred to the Separation Deed, made on 15 May 2020, which, in turn, referred to the Sale Agreement, the relevant iteration of which was dated 23 June 2020.

76. In addition to this cross-referencing, the dates on which the three documents were executed shows that they were part of a suite of documents executed for the purpose of accommodating the parties’ rights and obligations following the Insurer’s departure from the AMP group.

77. As the Trustee submitted, it is unlikely to have been an accident that Contract 20555 referred to the Separation Deed which, in turn, referred to the Sale Agreement. Rather, it is likely that this reflected the acknowledgement by the Insurer and the Trustee that the terms of Contract 20555 were agreed as part of a wider transaction.

78. Documents which form part of a wider transaction may be read together to determine the legal effect of each. The rule is not restricted to instruments between all the same parties. It is enough that the documents are executed contemporaneously, or within a short time, in relation to a single transaction where each party can be presumed to know of the relevant documents. ^[17]

    17. Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 144; [1919] HCA 64 (Isaacs J); Nunn v Wily (2001) 10 BPR 18,938; [2001] NSWSC 317 at [109] (Austin J); Manks v Whiteley [1912] 1 Ch 735 at 754 (Fletcher Moulton LJ, in dissent but upheld on appeal: Whiteley v Delaney [1914] AC 132 at 141 (Viscount Haldane LC)); and see the cases cited in P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [22.160]; particularly as to the latter point: McVeigh v National Australia Bank Ltd (2000) 278 ALR 429; [2000] FCA 187 at [29]-[34] (Finkelstein J) and [68]-[77] (Kenny J).

79. Thus, the terms of the Separation Deed and the Sale Agreement may shed light on how the parties intended Contract 20555 to operate.

80. As the Trustee pointed out, the Sale Agreement expressly addressed the transition of the Insurer from being an AMP related entity to being an entity unrelated to the AMP group. An aspect of the transaction was the future prospect that the Trustee may sponsor or support Members to change to a different insurer now that the commercial interests of the Insurer were no longer aligned with those of the AMP group.

81. This topic is expressly addressed in cl 26.1(b) of the Sale Agreement which provided:

“Subject to clause 26.1(c), the Seller and Seller Parent undertake to the Buyer, for a period of 3 years commencing on the Completion Date, that no Seller Group Member [which includes the Trustee] will solicit or actively encourage any person to solicit, and it will cause each Seller Group Member to refrain from soliciting or actively encouraging any person to solicit, the owners, beneficiaries or policyholders under any policies through any ‘program of internal replacement’ without the prior written consent of the Buyer. The term ‘program of internal replacement’ shall mean any Seller Group-sponsored or supported program offered to a class of policyholders in which any group of policies is intentionally targeted in a direct, programmatic or systematic manner for intended exchange for other policies written by the Seller Group or any party engaged by the Seller Group to write such policies or in each case any of their respective successors or assigns.” (Emphasis in original.)

82. Clause 26.1(c) provided that the prohibition in cl 26.1(b) did not apply where a “Seller Group Member” (which includes the Trustee) “who is a trustee is acting in accordance with its duties to its beneficiaries” or is acting on “instructions it receives from a member”.

83. Thus, the prohibition in cl 26.1(b):

1. made express provision, in some detail, about what is and is not permitted;

2. only applies for three years after completion; that is, to 30 June 2023; and

3. in any event does not prohibit a party such as the Trustee from acting in accordance with its duties to the Members or on instructions of its Members.

84. As the Trustee submitted, cl 26.1, read as a whole, shows that the parties contemplated that a trustee “acting in accordance with its duties to its beneficiaries” may have to solicit the owners, beneficiaries, or policyholders under policies to a “program of internal replacement” (as defined). Otherwise, the qualification of cl 26.1(b) by reference to cl 26.1(c) would not have been necessary.

85. I see the limited terms of the prohibition as being inconsistent with the construction of Contract 20555 that the Insurer contends to arise from the Implied Term.

Conclusion

86. My conclusion is that Contract 20555 should not be construed in the manner contended for by the Insurer.

87. I understand it to be common ground that the same conclusion must apply for each of the three remaining Contracts. However, as I have said, I will invite submissions about this.

88. It is therefore not necessary for me to address the parties’ submissions concerning the appropriateness and utility of the declaratory and injunctive relief sought by the Insurer.

89. I will invite submissions from the parties as to the way forward.

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Endnotes

Decision last updated: 16 February 2023